Examination of Witnesses (Questions 100-119)
Monday 15 December 2003
Mr Mike Eland, Mr Len Morris, and Mr Kevin Franklin
Q100 Mr Steinberg: And you are thinking
about this.
Mr Eland: No, we are working and
we are building this and we hope that it will be running by March
next year. This is not a programme which began in 1999. That was
when we contracted with Fujitsu to supply our infrastructure.
Q101 Mr Steinberg: Yes, I remember you
have changed it since then at a cost of £500 million.
Mr Eland: This is an e-programme
which we began to develop in 2001-02 and which is a radical transformation
of our organisation and which does require a long lead time in
terms of planning and putting together.
Q102 Mr Steinberg: You will of course
have done a lot of research on how it has worked in other countries
and how successful it is in other countries.
Mr Eland: Yes, we have information
from other countries about what they have done.
Q103 Mr Steinberg: Tell me the results
of some of that research.
Mr Eland: We feel that what we
are doing is very much in line with what most other advanced countries
are doing in terms of the sort of services we are intending to
offer.
Q104 Mr Steinberg: I am not sure whether
you answered the question there. Tell me about Canada for example.
Mr Eland: Canada is providing
a range of services. They see themselves as leading in that field.
Q105 Mr Steinberg: Leading in . . .?
Mr Eland: In providing e-services.
Q106 Mr Steinberg: According to the Report
nobody is using it still.
Mr Eland: I do not think that
is how they would see it. They have not produced some of the benefits
they were hoping to, that is true.
Q107 Mr Steinberg: Let us just try to
find it in the Report. Perhaps the NAO could tell me where I read
about Canada. Paragraph 2.10. Let us just look at paragraph 2.10.
I thought I had read it. I read these Reports every Sunday afternoon.
It is the only thing I have to do. My wife takes the dog for a
walk and I read these Reports. Sad; very sad. It is even sadder
when you read Reports like this, "The private sector and
international comparisons we undertook showed that it can take
a long time to secure a positive return on investments in e-services.
For example, Canada, which is widely acknowledged to be at the
forefront of e-government, found that e-services have not generated
any major cost savings to date". Why are we going to be any
better than Canada?
Mr Eland: It is a question of
timescale. As this Report indicates, you have to spend a lot of
cost up front. The benefits come later than that.
Q108 Mr Steinberg: What happens if the
benefits do not come?
Mr Eland: We are confident that
the benefits are going to come.
Q109 Mr Steinberg: That was not the question.
What happens if the benefits do not come? What happens if in four
years' time or two years' time people are still not using it?
What will you do then?
Mr Eland: We would have to look
at why—
Q110 Mr Steinberg: Spend another £500
million to get another system in.
Mr Eland: No, we would have to
look at why they were not using it and what we might do to ensure
that they did.
Q111 Chairman: If you look at paragraph
2.5 on page 27, it seems, particularly following on from those
questions, that you have not yet developed an e-programme wide
contingency plan. Is this a major risk?
Mr Eland: As part of the negotiations
on CCN30 with Fujitsu we have provided for an enhanced business
continuity service for the infrastructure with a recovery plan
for each site and critical service. That would be subject to annual
review. We have in fact begun to develop that.
Q112 Chairman: Will you have to negotiate
further amendments with Fujitsu?
Mr Eland: We do not believe we
have to do any further significant amendments. There might be
some.
Q113 Jon Trickett: Paragraph 1.12 indicates
that the information about the PFI excludes mainframe and application
development requirements. I just want to be clear in my own mind.
The 4:1 ratio which you finally determined you may be able to
achieve takes account of the cost of any mainframe and application
development requirements which may be necessary consequent upon
the other changes.
Mr Eland: Certainly application
developments, yes. I do not think mainframes are relevant in this
context.
Mr Morris: Our mainframe suite
is principally the VAT mainframe and our international trade mainframe;
we manage one with another supplier and the VAT mainframe in house
and our replacement date would be somewhere beyond 2012 for that
running application.
Q114 Jon Trickett: So with 4:1 or 3:1
or whatever it is, the 1 which is part of the 4:1 ratio includes
every single computer or IT change which is required to take place
as a result of these overall changes. That is the point I am trying
to get at. Have you put in all the costs or have you excluded
some costs?
Mr Eland: The full business case
we will produce in March will have the costs both of the IT development
and the business changes which are also required.
Q115 Jon Trickett: Yes, but we are not
in March, we are here where we are now and you are already spending
the money now. Can you tell me that you have shown all of the
costs which are necessary to achieve this particular innovation
in calculating the 4:1 ratio? It is quite a simple question.
Mr Eland: No, we cannot give you
that guarantee until we have done the full business case.
Q116 Mr Jenkins: In your memorandum,
in the third paragraph, you say "It is important to make
clear that they do not amount to a new IT PFI", that is the
negotiations with Fujitsu.
Mr Eland: Yes.
Q117 Mr Jenkins: Considering it started
off at £500 million in 1999, went to £600 million in
2003, now it is at £929 million, what percentage of additions
to a PFI would make it a new PFI and therefore subject to re-tendering,
in your opinion? What level do you think it should go to before
it is considered to be a new PFI?
Mr Eland: I do not think that
is what characterises a new PFI. A new PFI would be going in with
a totally different contract. What we have done here is buy additional
services within the framework of the original contract.
Q118 Mr Jenkins: May I ask Sir John the
same question? Does he have an opinion? If a tender is now extended
to twice its original contract sum, should the bolt-on additions
be considered for re-tendering as a new PFI?
Sir John Bourn: You cannot see
a definite rule about this. You have to look at the cases in the
circumstances in which they arise. There would be some cases where
the kind of increase you outline would be so great as to alter
the whole nature of the enterprise and in that sense it would
be right so to regard it. At other times you could see that it
would be a logical extension and then it would not be necessary
to call it a second PFI.
Q119 Mr Jenkins: I do not suppose the
Treasury have an opinion on this at all, do they?
Mr Glicksman: It would simply
depend on the terms of the contract and whether what you were
adding in came within the terms of the original contract or not.
Mr Jenkins: I am just concerned because
Mr Trickett and I have both been involved in contracts which have
escalated and we have known that we would not have been on that
route if we had gone back to the start and seen what the additional
cost was. We should certainly be aware that some guidelines should
be set down that when an addition of this nature takes place the
case should be taken to ensure that we either re-tender it or
prove substantially that it is an acceptable new addition to the
contract. I am not very happy with this one at all.
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